A crisis of consumer confidence led to a poor Easter for retailers and the seventh monthly fall in retail prices during April.
The British Retail Consortium's shop price index said prices were 1.28 per cent lower than a year ago.
This is the seventh consecutive month of price deflation, with prices down on a year ago in nine out of the last twelve months.
The prices of non-food items were 1.33 per cent lower than in April 2005 - the twentieth consecutive month of price deflation in non-food.
Food prices were 1.16 per cent adrift of twelve months ago - the biggest year-on-year fall since January 2000, the BRC said.
On a month-by-month basis the index saw a 0.1 per cent dip in prices to 98.69 during April. This was smaller than the February to March fall of 0.35 per cent, but reflected the trend of lower prices and discounting seen so far this year, the BRC said.
Kevin Hawkins, director general of the BRC, said the figures were of little surprise.
"With recent footfall data showing the worst Easter fortnight in over a decade and the continuing underlying lacklustre performance in retail sales, retailers are doing everything they can to stimulate demand," he said.
"We have seen price deflation for over six months now. This, coupled with rent and rate rises of up to ten per cent and a forthcoming National Minimum Wage hike of six per cent, shows the amount of pressure the sector is under to stimulate profitable sales."
Mike Watkins, senior manager of retailer services at ACNielsen said: "Whilst the UK shopper continues to benefit from price deflation this is not necessarily good news for all retailers.
"I expect the consumer to continue to be cautious on all discretionary spend for the next few months."